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IRS to use more data to prepare for long-term budget uncertainty

The Internal Revenue Service plans to use new data to create a more long-term
budget strategy.

Agency officials tell the Government Accountability Office that their goal is to
find ways to collect information to compare actual return on investments in
programs to their estimates.

"Comparing projected and actual ROI is important to assist budget decision makers
in determining funding levels for IRS and to hold managers and the IRS accountable
for the funding received," stated the IRS in response to GAO's recent report.

The IRS has taken some steps toward calculating this data after GAO's
encouragement in 2012. In December, the IRS will complete a study determining how
to measure the money brought in by enforcement initiatives. IRS told GAO it has
begun some reporting of actual ROI for three major enforcement programs.

In reviewing the IRS' fiscal 2015 budget request, GAO found the tax agency did not
use actual return data in allocation decisions. It also found the agency lacked a
strategic plan for operating in a time of budget uncertainty.

The IRS agreed with GAO's recommendations to develop actual ROI data and to use it
for financial planning. The agency also will create a more long-term strategy that
considers budget cuts and sequestration.

GAO initiated the study after President Barack Obama requested a 10.5 percent
increase for the IRS budget for next year. Between 2010 and 2014, GAO reported the
IRS budget decreased by approximately $900 million, staffing declined by more than
10,000 employees and performance in Enforcement and Taxpayer Services took a dive
as well.

"The GAO report is a clear call for this vital agency to be provided with the
resources it needs to educate and help taxpayers voluntarily meet their tax
obligations, as well as to perform the necessary enforcement steps to ensure
compliance with our nation's tax laws," said National Treasury Employee Union
President Colleen Kelley in a press release.

Due to the Office of Management and Budget generally requiring a 2 percent
reduction in agency budget submissions, increased spending in federal health and
retirement plans and the history of IRS receiving less than their requested funds,
GAO stated the IRS budget is not likely to return to the higher levels of 2010 or
2011.

Although the IRS has made short-term efforts to reduce spending through staff
attrition and furloughs, reduced travel and training and reduced telephone and
walk-in services, auditors found no long-term framework for operating under future
budget uncertainty.

"Without a strategy, IRS may not be able to operate effectively and efficiently in
an uncertain budget environment," stated the GAO.

To create this long-term strategy, GAO recommended the IRS reexamine programs to
see if they are effectively and efficiently achieving their missions, and to
streamline or consolidate management and operational processes for cost-
effectiveness.

GAO said return on investment data would help in making budget-conscious
allocation decisions, which plays into the long-term budget planning. The report
stated IRS calculated ROI projected for most enforcement initiatives in 2015. It
could not collect the actual revenues brought in due to limitations including
difficulty estimating indirect effects of enforcement initiatives on voluntary
compliance.

"As a result, neither IRS nor others know whether the program initiatives it
proposed, once implemented, were as productive as expected," GAO states, "We have
reported that calculating actual ROI would be a significant step forward in
determining how initiatives are performing and whether calculations for projected
ROIs need to be adjusted."